Last month, I participated in a Climate Week NYC event co-organized by Confluence Philanthropy and Carbon Tracker focused on the need for transparency within capital markets to help address the climate crisis.
We are nowhere close to aligning our economy to a 1.5-degree warming scenario."Why aren't investors more outraged?” asked Dana Lanza in her closing remarks at Confluence Philanthropy’s Climate Week event “Policymakers and the Value of Data and Transparency.”
It is a question that impact investors have been asking for decades.
Humanity’s addiction to fossil fuels has accelerated climate change and vulnerable communities across the globe are already suffering from more intense wildfires, storms, and floods. I believe that net zero should be an urgent planetary goal, and that it will take targeted policy and investment decision-making to get us there.
What Changes Are Needed Now?
The Climate Week panel I participated in, which included fellow Confluence member Ian Fuller, co-Founder and CEO of Westfuller, agreed on a few specific changes we believe we will need to achieve net-zero emissions:
More Investor Action
My colleagues and I hope to see more investors who are outraged by the climate crisis and climate injustice divest from fossil fuels, invest in renewable energy, and begin engaging with companies in other sectors on these issues.
Some panelists pointed out that divesting from equity securities of fossil fuel companies hasn’t had the intended consequence of raising the cost of capital of fossil fuel companies. Debt holders also need to engage. Divestment is also a way to signal to policymakers that strong rulemaking is essential, and to fossil fuel companies that business model change is required. There are no alternatives besides absolute emissions reductions through production cuts.
Uniform Data Standards and Better Data
We need a uniform set of data standards to inform decision-making. Existing data doesn’t provide enough clarity, credibility, or comparability. Verification of data is difficult due to voluntary disclosures. Better data is needed to guide policy and investment decision-making towards phasing out fossil fuels.
Disclosure of Scope 3 emissions and regulatory bodies like the SEC implementing climate disclosures or the IASB's S2 directive will help investors and policymakers alike in assessing the physical and transition risks of climate change and impact on valuations of investments.
More Engagement in Other Sectors
While the fossil fuel industry is the low-hanging fruit, as investors, we need to engage with other carbon-intensive sectors like utilities, industrials, and materials and hard-to-abate sub-industries like cement and steel.
The financial sector is another major culprit here and needs to disclose their financed emissions and take a stronger stance on not financing fossil fuel projects. All companies should disclose details of how they plan to achieve net-zero status by 2050 so that investors aren’t stuck with stranded assets in their portfolios.
Next Steps
The climate crisis is daunting, but there are concrete action steps we can take now to build an equitable, just, and sustainable world. Whether you approach the situation out of outrage, fear for the future, or hope — you can be part of the solution. To help drive policy change, we can vote and elect officials who will implement policies. We can look at our own investment portfolios and change how we allocate our capital.
We can also fight for people of color, low- and moderate-income families, and coastal communities who are already bearing the worst of the consequences of climate change. At Veris, we believe in the need to address climate justice, which holds that those who are impacted the most by climate change should have a voice in policy and investment decision-making and benefit from the economic upside of investments in climate solutions and a just transition.
Roraj Pradhananga, Partner and Managing Director of Research, Veris Wealth Partners
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